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Former Bank of China President Li Lihui: Developed Countries Are Changing Attitudes Towards Cryptocurrency Regulation

Li Lihui, former president of the Bank of China and now head of the blockchain research at the National Internet Finance Association of China, said in Beijing on Wednesday that some developed countries are changing their attitudes toward cryptocurrency regulation by giving 3 examples.

Singapore’s central bank, the Monetary Authority of Singapore(MAS), have launched a fintech regulatory sandbox in 2015 which gives new fintech companies, including blockchain start-ups, a chance to experiment without having to reply with strict and different rules promulgated by government agencies. MAS has given green light to some ICO projects and does not deem a utility token with a pre-operative platform behind it as a security.

In Japan, bitcoin has been accepted as a legal payment method since April 2017. In the same month,the Japanese Payment Services Act went into effect, bringing bitcoin exchanges under anti-money laundering and know-your-customer(KYC) rules.

In the United States, prior to 2016, the US regulators focused on preventing virtual currency from challenging the status of fiat money. But in 2017,the U.S. Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC) took new actions to set the cryptocurrency market on the right path. SEC escalated crackdown on some ICO organizers that had violated regulations and labeled some ICO tokens as a security. In last December, CFTC approved two regulated Bitcoin futures products. Besides, the Uniform Law Commission(ULC) introduced its Uniform Regulation of Virtual Currency Business Act last year, seeking to harmonize state laws for businesses that utilize virtual currencies as monetary tools.

“To put it simply, Singapore focuses on the innovative experiments in digital finance, Japan doubles its effort to develop the digital financial market, and the United States attaches importance to the regulation of the market. ” Li said, “Meanwhile, China focuses on preventing digital financial risks by banning cryptocurrency trading and ICO activities.”

He put forward 2 suggestions for promoting the development of the cryptocurrency market while preventing systematic financial risks: first, it is required to strengthen the coordination of regulators at various levels to speed up the establishment of digital financial system; second, to introduce regulatory framework first for emerging technology, then law.

In addition, Li also highlighted the functions of blockchain-based official digital currency.

“Whether the official digital currency should replace the status of traditional currency depends on four key factors: efficiency, reliability, cost and law. The state-backed digital currency can hardly rival WeChat Pay and Alipay in the daily payment market, but it could be highly efficient in the centralized marketplace.” Li said.

He believed if China plans to launch a digital draft system, it must have an official digital currency as the solid foundation for liquidation.